ECONOMIC AND MONETARY COMMUNITY OF CENTRAL AFRICA

CENTRAL AFRICAN MONETARY UNION

THE MINISTERIAL COMMITTEE

03/08
REGULATION.../CEMAC/UMAC/CM on Freely Subscribable Public Securities Issued by CEMAC Member States

THE MINISTERIAL COMMITTEE,

Having regard to the Treaty establishing the Economic and Monetary Community of Central Africa (CEMAC) and its Addendum regarding the institutional and legal system of the Community;

Having regard to the Convention governing the Central African Monetary Union (UMAC), notably Article 32, paragraph 2, fourth indent, concerning rules regarding the collection and allocation of financial savings;

Having regard to the Statutes of the Bank of Central African States (BEAC), notably Article 21;

Having regard to the deliberation of 2 July 2008 by the Monetary Policy Committee approving the conditions and procedures for the issuance, placement and holding of freely subscribable public securities issued by CEMAC Member States;

Having regard to the conforming opinion of the BEAC Board of Directors delivered during its session of 3 July 2008, in Brazzaville, Republic of Congo;

Meeting in its extraordinary session of 06 October 2008;

On the proposal of the Governor of the BEAC,

ADOPTS THE REGULATION SET OUT BELOW:

TITLE I: GENERAL PROVISIONS

ARTICLE 1:

For the purposes of this Regulation, the following terms are defined as follows:

Auction: procedure by which the BEAC ensures, on behalf of the Treasury, the physical organization of issuances of freely subscribable public securities and their allocation among the various approved credit institutions submitting bids;
Assimilation: linking a newly issued security to a prior borrowing line with identical characteristics;
Assimilable Treasury Bills (BTA): financial instruments issued during a public borrowing and representing a short-term claim against the State, characterized by the possibility of issuing supplementary tranches of the initial borrowing, with the future issuance being assimilated to the existing issuance. Interest is deducted at subscription;
Securities Clearing and Custody Unit (CRCT): autonomous unit created within the Bank of Central African States (BEAC), responsible for managing the issuance account, acting as settlement agent and central securities depository for freely subscribable public securities issued by CEMAC Member States, in application of this Regulation;
Credit institution: entity that, in any form whatsoever, habitually carries out banking operations as defined in Article 4 of the Annex to the Convention of 17 January 1992 on the harmonization of banking regulation in the Central African States;
Member State: any State party to the Treaty establishing the Economic and Monetary Community of Central Africa;
Issuance: creation and circulation of freely subscribable public securities;
Governor: Governor of the Bank of Central African States;
Money market: central bank liquidity market organized by BEAC Board of Directors Decisions of 28 July and 29 November 1993;
Assimilable Treasury Bonds (OTA): negotiable securities issued during a public borrowing and representing a medium or long-term claim against the State,

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characterized by the possibility of issuing supplementary tranches of the initial borrowing, with the future issuance being assimilated to the existing issuance. Interest is payable annually;

Repo transaction: operation by which a credit institution, the transferor, transfers full ownership to the BEAC, the transferee, for an agreed price, of freely subscribable public securities, and by which the transferor and transferee respectively and irrevocably commit, the former to repurchase the transferred securities, the latter to resell them for an agreed price and date.
Treasury Securities Specialist: credit institution approved by the issuing State to monitor and stimulate the market for freely subscribable public securities, notably by participating in related auctions organized by the BEAC;
Trustee: judicial representative appointed within the framework of a collective debt settlement procedure, on the one hand to assist or represent the debtor, and on the other hand to represent its creditors;
Syndication: process by which several credit or financial institutions agree to jointly undertake an operation involving securities, notably during a securities issuance;
Account Keeper: credit institution approved as a Treasury Securities Specialist authorized to open securities accounts for clients in application of this Regulation;
Freely subscribable public security: claim against the State, issued in the form of an Assimilable Treasury Bill or Assimilable Treasury Bond via calls for tenders organized by the BEAC, addressed to Treasury Securities Specialists.

ARTICLE 2:

This Regulation governs the issuance, placement and custody of freely subscribable public securities of CEMAC Member States, the auctions for which are organized by the BEAC.

Issuances of public securities via syndication are excluded from the scope of this Regulation.

ARTICLE 3:

Freely subscribable public securities are dematerialized upon creation and registered in an account with a Treasury Securities Specialist acting as Account Keeper.

Freely subscribable public securities are freely negotiable.

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ARTICLE 4:

Freely subscribable public securities issued under this Regulation are Assimilable Treasury Bills (BTA) and Assimilable Treasury Bonds (OTA).

Assimilable Treasury Bills (BTA) are short-term securities. They are issued with a face value of 1,000,000 (one million) CFA francs for terms of 13 weeks, 26 weeks, 52 weeks.

Assimilable Treasury Bonds (OTA) are medium or long-term securities. They are issued with a face value of 10,000 (ten thousand) CFA francs for a term equal to or greater than 2 years. Repayment of Assimilable Treasury Bonds is made in a single lump sum at maturity.

ARTICLE 5:

Interest on Assimilable Treasury Bills (BTA) is deducted at subscription. It is calculated on a commercial year basis, i.e., 360 days.

Interest on Assimilable Treasury Bonds (OTA) is payable annually. It is calculated on a calendar year basis, i.e., 365 or 366 days.

TITLE II: ISSUANCE AND MANAGEMENT OF FREELY SUBSCRIBABLE PUBLIC SECURITIES

ARTICLE 6:

States issue freely subscribable public securities via auctions organized by the BEAC.

States with arrears on public securities issued under this Regulation cannot issue others until the debt related to prior issuances is fully cleared.

Auctions for freely subscribable public securities are exclusively reserved for Treasury Securities Specialists, abbreviated "TSS".

Treasury Securities Specialists are approved by the Minister in charge of Finance among credit institutions established in CEMAC that meet the specifications set by him according to a model adopted by the Ministerial Committee, after opinion of the Monetary Policy Committee.

The approval decision is communicated to them individually.

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The Minister in charge of Finance may withdraw or suspend the approval of a Treasury Securities Specialist if it fails to comply with the specifications or its obligations under the convention linking it to the State.

ARTICLE 7:

The volume of auctions is determined in accordance with texts governing State debt.

The Minister in charge of Finance publishes the quarterly auction calendar at least two weeks before the start of each civil quarter. This quarterly calendar falls within an annual State treasury management program.

ARTICLE 8:

Auctions for Assimilable Treasury Bills (BTA) are conducted via weekly calls for tenders.

Auctions for Assimilable Treasury Bonds (OTA) are conducted via monthly calls for tenders.

Auction conditions are announced four days in advance by the Minister in charge of Finance.

ARTICLE 9:

The auction takes place at bid prices. Accepted orders are fulfilled at the interest rates or prices proposed by bidders, within the maximum interest rate or maximum price decided by the State.

The auction decision is taken by the Minister in charge of Finance based on a table prepared by the BEAC.

Following the auction, general information, notably the amount of bids submitted, amounts fulfilled, and accepted limit rates and prices, are disseminated via press.

Procedures for forming, submitting, and tallying bidder offers are set by conventions concluded, on the one hand, between the BEAC and National Treasuries, and on the other hand, between the BEAC and Treasury Securities Specialists.

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ARTICLE 10:

Subscriptions to freely subscribable public securities are firm and irrevocable.

They are paid in a single installment by debiting the Treasury Securities Specialist's account at the BEAC and crediting the special Treasury account opened for this purpose.

ARTICLE 11:

Treasury Securities Specialists are obligated to place freely subscribable public securities with the public under the conditions provided in the specifications referred to in Article 6 of this Regulation.

Freely subscribable public securities may be acquired by any resident or non-resident person, subject to aspects related to harmonized foreign exchange regulation.

Treasury Securities Specialists ensure the negotiation and liquidity of freely subscribable public securities on the market. They are obligated, notably, to display purchase and sale prices for freely subscribable public securities at their counters and to conclude transactions within the limits and conditions set in the aforementioned specifications. They issue receipts to buyers who request them, detailing the characteristics of the subscribed securities.

TITLE III: CREATION, ORGANIZATION AND OPERATION OF THE SECURITIES CLEARING AND CUSTODY UNIT (CRCT)

ARTICLE 12:

A "Securities Clearing and Custody Unit" (CRCT) is created within the Bank of Central African States (BEAC), located at the BEAC Headquarters.

After five years of operation under the auspices of the BEAC and following an evaluation of its operation, all or part of the CRCT's activities may be transferred to central securities depositories.

The organization and operation rules as well as the conditions for executing CRCT operations are detailed in the General Regulation of the CRCT, issued by the Supervisory Board on the proposal of the Governor.

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ARTICLE 13:

The CRCT is administered by a Supervisory Board composed of:

Governor of the BEAC, Chairman;
Director of Credit, Capital Markets and Banking Supervision of the BEAC;
Director of Payment Systems and Means of the BEAC;
representative of the Central African Banking Commission (COBAC);
representative of the Central African Financial Market Supervisory Commission (COSUMAF);
representative of the Cameroon Financial Markets Commission (CMF);
representative of the autonomous department of the BVMAC, acting as central securities depository;
representative of the Cameroon Autonomous Amortization Fund in its capacity as central securities depository;
representative, rotating by State, of the National Treasuries.

Representation of the National Treasuries is attached to the Presidency of the Ministerial Committee.

The Supervisory Board meets as often as necessary and at least four times a year upon summons by its Chairman.

It deliberates validly when at least half of its members are present or represented.

ARTICLE 14:

The day-to-day management of the CRCT is ensured by a Manager.

On the proposal of the Governor, the Supervisory Board appoints from among BEAC executives the Manager of the CRCT. This person may be assisted by a deputy.

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The Manager reports on agenda items to the Supervisory Board meetings.

The Manager prepares a detailed annual report for the Supervisory Board. The Governor transmits this report to the BEAC Monetary Policy Committee, the BEAC Board of Directors, and the UMAC Ministerial Committee.

ARTICLE 15:

The Securities Clearing and Custody Unit exercises, under conditions specified by implementing texts of this Regulation, the functions of issuance account manager, settlement agent, and central securities depository, notwithstanding any contrary provision.

It is responsible for any other function related to its activity.

To this end, the CRCT may issue Instructions that are mandatory for its affiliates.

ARTICLE 16:

Affiliation to the CRCT by Treasury Securities Specialists is mandatory. The BEAC is affiliated to the CRCT by right.

Admission as an affiliate is communicated individually to Treasury Securities Specialists by the CRCT. Affiliation implies adherence to the General Regulation of the CRCT and its Instructions.

The CRCT may suspend or exclude a Treasury Securities Specialist in case of non-compliance with applicable regulatory and conventional provisions regarding freely subscribable public securities.

CRCT services are subject to pricing according to a schedule fixed by the Supervisory Board.

ARTICLE 17:

The CRCT distinguishes, for each affiliate, the freely subscribable public securities it holds for its own account and those belonging to its clients.

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ARTICLE 18:

The CRCT is the global accountant for the issuance. It debits the "issuance" account for each issuance of public securities and records the exact counterpart in the statements of its affiliates.

It ensures daily system integrity by comparing the issuance account with the statements registered for its affiliates.

It performs any verification on the regularity of operations executed by Treasury Securities Specialists.

It may at any time ensure that the registered statement of Treasury Securities Specialists corresponds to the total of securities registered by account-keeping affiliates on behalf of their holders, subject to ongoing regularization operations justified by accounting documents.

The CRCT may conduct any investigations it deems necessary for controls, both on documents and on-site, directly or through COBAC. Professional secrecy cannot be invoked against it.

It may issue injunctions to its affiliates and suspend their participation in its operations.

TITLE IV: BOOK ENTRY OF FREELY SUBSCRIBABLE PUBLIC SECURITIES

ARTICLE 19:

Freely subscribable public securities issued by CEMAC Member States must be credited to an account held by a Treasury Securities Specialist or by the BEAC.

In their accounting, Treasury Securities Specialists distinguish freely subscribable public securities belonging to them in their own right and those of their clients. Freely subscribable public securities they hold for their own account must not exceed the threshold set by CRCT Instruction.

ARTICLE 20:

Freely subscribable public securities registered in an account with a Treasury Securities Specialist are considered to be deposited under a regular deposit arrangement.

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Ownership of freely subscribable public securities results from book entry with the Treasury Securities Specialist, acting as Account Keeper.

Book entry establishes, vis-à-vis all parties, the ownership of the account holder over the registered securities and all rights attached thereto.

ARTICLE 21:

The relationship between the account holder and the Treasury Securities Specialist, acting as Account Keeper, must be determined by a convention comprising notably the mandatory statements fixed by this Regulation.

ARTICLE 22:

Any convention for a freely subscribable public securities account must contain the following details:

identity of the account holder;
explicit mention of the deposit contract;
pricing of provided services;
duration of validity of the convention;
confidentiality obligations incumbent on the Treasury Securities Specialist in accordance with current laws and regulations regarding professional secrecy;
characteristics of orders likely to be addressed to the Treasury Securities Specialist. These characteristics take into account, where applicable, the rules of the markets on which these orders are to be executed;
method of transmitting orders;
content and procedures for informing the order giver on the execution of the service;
deadline for contesting executed operations;
indication that the delivery of dematerialized freely subscribable public securities may, upon request, result in the issuance of a receipt and that the registration notice sent by the Treasury Securities Specialist to its client upon receipt of the securities transfer deposit constitutes proof of delivery.

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ARTICLE 23:

The Treasury Securities Specialist credits the freely subscribable public securities to the client's securities account.

The account holder's ownership rights over the freely subscribable public securities prevail under all circumstances against the Treasury Securities Specialist acting as Account Keeper.

The Treasury Securities Specialist, acting as Account Keeper, may not use client securities for its own account without the express and written consent of the account holder. In the absence of such consent, the account holder is entitled to bring a claim for recovery